Crane Co.Reports Third Quarter `09 Results; Increases Lower End of EPS Guidance
http://www.businesswire.com/news/home/20091026006459/en
STAMFORD, Conn.--(Business Wire)--
Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial
products, reported third quarter 2009 net income attributable to common
shareholders of $35.1 million, or $0.60 per diluted share, compared to third
quarter 2008 net income attributable to common shareholders of $36.1 million, or
$0.60 per diluted share.
Third quarter 2009 sales of $551 million decreased $92.0 million, or 14%, which
included a core sales decline of $100.5 million (15%) and unfavorable foreign
currency translation of $17.8 million (3%), partially offset by an increase in
sales from acquired businesses of $26.3 million (4%).
Order backlog was $682 million at September 30, 2009 compared to $697 million at
June 30, 2009, and $779 million at September 30, 2008, representing declines of
2% and 12%, respectively.
Cash Flow and Financial Position
Cash provided by operating activities was $80.0 million in the third quarter of
2009, compared to $41.0 million in the third quarter of 2008, primarily
reflecting lower operating working capital in 2009. Free cash flow (cash
provided by operating activities less capital spending) for the third quarter of
2009 was $76.2 million, compared to $27.7 million in the prior year, reflecting
higher cash provided from operations and lower capital spending. The Company`s
cash position was $304.9 million at September 30, 2009, up from $233.0 million
at June 30, 2009 and $231.8 million at December 31, 2008. (Please see the
Condensed Statement of Cash Flows and Non-GAAP table)
"We are pleased with our performance this quarter. Despite a 14% decline in
sales from the third quarter of 2008, our operating profit and earnings per
share were flat compared to 2008, primarily reflecting our success in
re-aligning our cost base," said Crane Co. president and chief executive
officer, Eric C. Fast. "Our operating margin improved by 160 basis points, to
10.1%, as compared to 8.5% a year ago. While sales in Engineered Materials,
Merchandising Systems, Fluid Handling and Controls were lower than the prior
year quarter, they improved slightly from the second quarter this year. Total
Aerospace & Electronics segment sales have been declining for the past year
primarily because of weaker demand in our long-cycle Aerospace business.
"In July, we estimated our cost savings would be in excess of $125 million. We
now expect that our cost savings for 2009 will exceed $150 million and believe
this productivity will provide excellent operating leverage in 2010. Excluding
the two acquisitions in 2008, headcount has been reduced by 2,050 people, or 17%
since year-end 2007, of which 150 occurred in the third quarter of this year and
additional headcount reductions are expected in the fourth quarter. We have
increased the lower end of our EPS guidance range from $1.75 - $2.05 to $1.90 -
$2.05 on a GAAP basis reflecting, in part, our increased projected cost savings.
"With $305 million in cash, a $300 million revolving bank credit agreement, and
no near-term debt maturities, we have a solid financial foundation to continue
to manage through the current environment and we are positioned for growth as
our end markets recover."
Segment Results
All comparisons detailed in this section refer to the third quarter 2009 versus
the third quarter 2008.
Aerospace & Electronics
Third Quarter Change
(dollars in millions) 2009 2008
Sales $136.9 $159.7 ($22.8 ) (14 %)
Operating Profit $19.9* $10.9 $9.0 83 %
Profit Margin 14.6 % 6.8 %
* Includes $0.2 million of restructuring charges.
The third quarter 2009 sales decrease of $22.8 million, or 14%, reflected a
$20.6 million decline in Aerospace Group demand and a decrease of $2.2 million
of Electronics Group revenue. Segment operating profit increased by $9.0 million
as a result of lower engineering spending primarily in the Aerospace Group and
continued year-over-year operating performance improvement in our Electronics
Group.
Aerospace & Electronics order backlog was $370 million at September 30, 2009
compared to $383 million at June 30, 2009 and $418 million at September 30,
2008, representing quarterly declines of 3% and 12%, respectively.
Engineered Materials
Third Quarter Change
(dollars in millions) 2009 2008
Sales $48.1 $58.2 ($10.1 ) (17 %)
Operating Profit $7.5* $4.4 $3.1 71 %
Profit Margin 15.7 % 7.6 %
* Includes $0.2 million of restructuring charges.
Segment sales declined 17%, reflecting continued depressed demand from
transportation and building products end markets. Sales to recreational vehicle
customers increased 6% over the third quarter of 2008, reflecting market share
gains and modest improvement in industry sales. Operating profit and margins
increased reflecting productivity improvements, lower SG&A costs and plant
closures. Headcount has been reduced 42% compared to year end 2007 levels.
Merchandising Systems
Third Quarter Change
(dollars in millions) 2009 2008
Sales $75.9 $93.6 ($17.7 ) (19 %)
Operating Profit $6.9* $10.9 ($4.0 ) (37 %)
Profit Margin 9.1 % 11.6 %
* Includes $1.5 million of restructuring gains.
Total Merchandising Systems sales decreased $17.7 million, or 19%, reflecting
continued difficult market conditions. Sales of Payment Solutions, with key end
markets in retail, transportation and non-U.S. gaming applications, declined
substantially more than Vending Solutions. Operating profit declined as
deleverage on the reduced sales more than offset the favorable impact of a legal
settlement and the reduction of a liability estimate associated with the
Company`s restructuring program. The previously announced consolidation of the
Company`s vending machine production from St. Louis, Missouri to its Williston,
South Carolina facility is expected to be complete by year-end. Merchandising
Systems headcount has been reduced 21% compared to year-end 2007 levels and
further reductions will occur as the plant consolidation activities are
completed.
Fluid Handling
Third Quarter Change
(dollars in millions) 2009 2008
Sales $266.8 $293.6 ($26.8 ) (9 %)
Operating Profit $34.9* $34.9 - -
Profit Margin 13.1 % 11.9 %
* Includes $1.6 million of restructuring charges.
Third quarter 2009 sales decreased $26.8 million, or 9%, which included a core
sales decline of $38.4 million (13%) and unfavorable foreign currency
translation of $14.7 million (5%), partially offset by sales from acquired
businesses (Delta and Krombach) of $26.3 million (9%). Although overall Fluid
Handling segment sales increased slightly from the second quarter, unfavorable
end markets continued to impact the longer-cycle, project-based chemical and
pharmaceutical businesses, as well as many of our MRO businesses, resulting in
the year-over-year sales decline. Fluid Handling profit margins increased to
13.1% from last year`s level of 11.9% reflecting disciplined price versus
material cost, and the impact of cost reduction initiatives, which offset the
deleverage of lower sales.
Fluid Handling order backlog was $252 million at September 30, 2009 compared to
$256 million at June 30, 2009 and $286 million at September 30, 2008,
representing quarterly declines of 2% and 12%, respectively.
Controls
Third Quarter Change
(dollars in millions) 2009 2008
Sales $23.1 $37.6 ($14.5 ) (39 %)
Operating Profit (Loss) ($1.7 ) $3.3 ($4.9 ) (152 %)
Profit Margin (Loss) (7.2 %) 8.7 %
Third quarter 2009 sales declined 39% reflecting continued depressed conditions
in the oil & gas and transportation end markets. The operating loss reflected
the impact of lower sales in all of the Controls businesses. In response, cost
actions are continuing and Controls headcount has been reduced 24% compared to
year end 2007.
Full Year 2009 Guidance
The Company maintained its 2009 sales estimate of $2.2 billion, and increased
the lower end of its GAAP earnings per share guidance to $1.90 - $2.05 from
$1.75 - $2.05. The guidance includes charges for potential restructuring and
integration activities of $0.07 per share, compared to the prior estimate of
$0.10 per share, and a charge of $0.08 per share associated with a previously
disclosed legal settlement. Excluding those charges, non-GAAP guidance is $2.05
- $2.20 per share. Free cash flow guidance was maintained at $135 million
compared to the $146 million achieved in 2008. (Please see Non-GAAP table.)
Conference Call
Crane Co. has scheduled a conference call to discuss the third quarter`s
financial results on Tuesday, October 27, 2009 at 10:00 A.M. (Eastern). All
interested parties may listen to a live webcast of the call at
http://www.craneco.com. An archived webcast will also be available to replay
this conference call directly from the Company`s website.
Crane Co. is a diversified manufacturer of highly engineered industrial
products. Founded in 1855, Crane provides products and solutions to customers in
the aerospace, electronics, hydrocarbon processing, petrochemical, chemical,
power generation, automated merchandising, transportation and other markets. The
Company has five business segments: Aerospace & Electronics, Engineered
Materials, Merchandising Systems, Fluid Handling, and Controls. Crane has
approximately 11,000 employees in North America, South America, Europe, Asia and
Australia. Crane Co. is traded on the New York Stock Exchange (NYSE:CR). For
more information, visit www.craneco.com.
This press release may contain forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995.These statements present
management`s expectations, beliefs, plans and objectives regarding future
financial performance, and assumptions or judgments concerning such
performance.Any discussions contained in this press release, except to the
extent that they contain historical facts, are forward-looking and accordingly
involve estimates, assumptions, judgments and uncertainties.There are a number
of factors that could cause actual results or outcomes to differ materially from
those addressed in the forward-looking statements.Such factors are detailed in
the Company`s Annual Report on Form 10-K for the fiscal year ended December 31,
2008 and subsequent reports filed with the Securities and Exchange Commission.
(Financial Tables Follow)
2009 - 18
CRANE CO.
Income Statement Data
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net Sales:
Aerospace & Electronics $ 136,896 $ 159,716 $ 435,838 $ 484,095
Engineered Materials 48,065 58,174 127,990 213,884
Merchandising Systems 75,879 93,611 220,905 323,348
Fluid Handling 266,810 293,621 796,383 883,221
Controls 23,060 37,556 70,223 110,480
Total Net Sales $ 550,710 $ 642,678 $ 1,651,339 $ 2,015,028
Operating Profit:
Aerospace & Electronics $ 19,928 $ 10,896 $ 56,259 $ 45,378
Engineered Materials 7,530 4,410 13,597 24,164
Merchandising Systems 6,914 10,884 16,569 42,361
Fluid Handling 34,882 34,915 98,708 126,233
Controls (1,667 ) 3,277 (2,984 ) 8,124
Corporate (12,134 ) (9,764 ) (43,320 ) * (30,022 )
Total Operating Profit 55,453 54,618 138,829 216,238
Interest Income 270 3,212 1,578 8,379
Interest Expense (6,821 ) (6,053 ) (20,370 ) (19,236 )
Miscellaneous- Net 83 (191 ) 2,323 1,570
Income Before Income Taxes 48,985 51,586 122,360 206,951
Provision for Income Taxes 13,832 15,612 35,973 63,790
Net income before allocations to noncontrolling interests 35,153 35,974 86,387 143,161
Less: Noncontrolling interest in subsidiaries' earnings (losses) 45 (108 ) 202 (308 )
Net income attributable to common shareholders 35,108 36,082 86,185 143,469
Share Data:
Earnings per Diluted Share $ 0.60 $ 0.60 $ 1.47 $ 2.36
Average Diluted Shares Outstanding 58,842 60,485 58,703 60,694
Average Basic Shares Outstanding 58,472 59,811 58,462 59,884
Supplemental Data:
Cost of Sales $ 365,482 $ 434,382 $ 1,117,028 $ 1,342,560
Selling, General & Administrative 129,775 153,678 395,482 456,230
Depreciation and Amortization ** 14,025 14,270 43,857 43,965
Stock-Based Compensation Expense 2,266 3,462 6,702 10,447
* Includes a charge of $7.25 million related to the settlement of a lawsuit brought against the Company by a customer alleging failure of our fiberglass-reinforced plastic material.
** Amount included within cost of sales and selling, general & administrative costs.
CRANE CO.
Condensed Balance Sheets
(in thousands)
September 30, December 31,
2009 2008
ASSETS
Current Assets
Cash and Cash Equivalents $ 304,888 $ 231,840
Accounts Receivable, net 314,070 334,263
Current Insurance Receivable - Asbestos 35,300 41,300
Inventories, net 303,243 349,926
Other Current Assets 68,649 63,911
Total Current Assets 1,026,150 1,021,240
Property, Plant and Equipment, net 284,715 290,814
Long-Term Insurance Receivable - Asbestos 222,136 260,660
Other Assets 429,056 420,542
Goodwill 770,328 781,232
Total Assets $ 2,732,385 $ 2,774,488
LIABILITIES AND EQUITY
Current Liabilities
Notes Payable and Current Maturities of Long-Term Debt $ 952 $ 16,622
Accounts Payable 142,861 182,147
Current Asbestos Liability 91,000 91,000
Accrued Liabilities 226,992 246,915
Income Taxes 4,535 1,980
Total Current Liabilities 466,340 538,664
Long-Term Debt 398,613 398,479
Long-Term Deferred Tax Liability 26,525 22,971
Long-Term Asbestos Liability 760,184 839,496
Other Liabilities 221,669 229,057
Total Equity 859,054 745,821
Total Liabilities and Equity $ 2,732,385 $ 2,774,488
CRANE CO.
Condensed Statements of Cash Flows
(in thousands)
Three Months Ended Nine Months Ended
September 30 September 30
2009 2008 2009 2008
Operating Activities:
Net income attributable to common shareholders $ 35,108 $ 36,082 $ 86,185 $ 143,469
Noncontrolling interest in subsidiaries' earnings (losses) 45 (108 ) 202 (308 )
Net income before allocations to noncontrolling interests 35,153 35,974 86,387 143,161
Gain on divestiture - - - (932 )
Depreciation and amortization 14,025 14,270 43,857 43,965
Stock-based compensation expense 2,266 3,462 6,702 10,447
Deferred income taxes 12,107 10,774 14,891 22,639
Cash provided by (used for) operating working capital 33,659 10,853 13,037 (35,435 )
Other 5,029 (16,065 ) (4,361 ) (18,466 )
Subtotal 102,239 59,268 160,513 165,379
Asbestos related payments, net of insurance recoveries (22,253 ) (18,301 ) (34,788 ) * (34,915 )
Total provided by operating activities 79,986 40,967 125,725 130,464
Investing Activities:
Capital expenditures (3,827 ) (13,257 ) (21,259 ) (33,658 )
Proceeds from disposition of capital assets 1,001 284 3,326 728
Payment for acquisition, net of cash acquired - (27,877 ) - (28,009 )
Proceeds from divestiture - - - 2,106
Total used for investing activities (2,826 ) (40,850 ) (17,933 ) (58,833 )
Financing Activities:
Dividends paid (11,695 ) (11,965 ) (35,079 ) (33,521 )
Reacquisition of shares on open market - - - (40,000 )
Stock options exercised - net of shares reacquired (546 ) (387 ) (299 ) 8,704
Excess tax benefit from stock-based compensation 131 488 131 1,388
Change in short-term debt (960 ) (2,631 ) (16,365 ) 411
Total used for financing activities (13,070 ) (14,495 ) (51,612 ) (63,018 )
Effect of exchange rate on cash and cash equivalents 7,824 (28,739 ) 16,868 (13,552 )
Increase (decrease) in cash and cash equivalents 71,914 (43,117 ) 73,048 (4,939 )
Cash and cash equivalents at beginning of period 232,974 321,548 231,840 283,370
Cash and cash equivalents at end of period $ 304,888 $ 278,431 $ 304,888 $ 278,431
* Includes a $14.5 million insurance settlement receipt from the Highlands Insurance Company.
CRANE CO.
Order Backlog
(in thousands)
September 30, June 30, March 31, December 31, September 30,
2009 2009 2009 2008 2008
Aerospace & Electronics $ 369,898 $ 383,335 $ 396,393 $ 418,382 $ 418,317
Engineered Materials 8,454 9,135 6,924 6,942 11,035
Merchandising Systems 23,574 19,955 18,822 23,407 25,676
Fluid Handling* 252,333 256,467 275,660 302,653 285,988
Controls 27,292 28,026 26,667 30,509 37,816
Total Backlog $ 681,551 $ 696,918 $ 724,466 $ 781,893 $ 778,832
* Includes Order Backlog of $40.4 million in September 2009, $41.8 million in June 2009, $46.5 million in March 2009, $57.0 million in December 2008 and $2.3 million in September 2008 pertaining to the 2008 acquisitions of Delta and Krombach.
CRANE CO.
Non-GAAP Financial Measures
(in thousands)
Three Months Ended Nine Months Ended Percent Change Percent Change
September 30, September 30, September 30, 2009 September 30, 2009
2009 2008 2009 2008 Three Months Nine Months
INCOME ITEMS
Net Sales $ 550,710 $ 642,678 $ 1,651,339 $ 2,015,028 -14.3 % -18.0 %
Operating Profit 55,453 54,618 138,829 216,238
Special Items impacting Operating Profit:
Lawsuit Settlement - Pre-Tax (a) - - 7,250 -
Restructuring Charges - Pre-Tax (b) 513 - 2,360 -
Environmental Reimbursement - Pre-Tax (d) - - - (4,444 )
Operating Profit before Special Items $ 55,966 $ 54,618 $ 148,439 $ 211,794 2.5 % -29.9 %
Percentage of Sales 10.2 % 8.5 % 9.0 % 10.5 %
2009 Full Year Guidance
Low High
Net Income Attributable to Common Shareholders $ 35,108 $ 36,082 $ 86,185 $ 143,469 $ 112,000 $ 121,000
Per Share $ 0.60 $ 0.60 $ 1.47 $ 2.36 $ 1.90 $ 2.05
Special Items impacting Net Income Attributable to Common Shareholders:
Lawsuit Settlement - Net of Tax (a) - 4,713 - 4,713 (a) 4,713 (a)
Per Share $ - - $ 0.08 - $ 0.08 $ 0.08
Restructuring Charges - Net of Tax 345 (b) - 1,787 (b) - 4,100 (c) 4,100 (c)
Per Share $ 0.01 - $ 0.03 - $ 0.07 $ 0.07
Environmental Reimbursement - Net of Tax (d) - - (2,889 ) - -
Per Share - - - (0.05 ) - -
Net Income Attributable To Common Shareholders Before Special Items $ 35,453 $ 36,082 $ 92,685 $ 140,580 -1.7 % -34.1 % $ 120,813 $ 129,813
Per Share $ 0.60 $ 0.60 $ 1.58 $ 2.32 $ 2.05 $ 2.20
(a) During the three months ended March 31, 2009, the Company recorded a charge for the settlement of a lawsuit brought against the Company by a customer alleging failure or our fiberglass-reinforced plastic material. During the three months ended June 30, 2009, the Company recorded additional insurance recoveries associated with the aforementioned settlement.
(b) Amounts represent restructuring charges in connection with the Restructuring Program.
(c) Amounts represent restructuring charges in connection with the Restructuring Program and integration costs associated with the Krombach acquisition.
(d) During the three months ended June 30, 2008, the Company recorded a $2.1 million reimbursement from the US Government and a $2.4 million reimbursement from a service provider, both related to environmental clean-up activities.
September 30, December 31,
2009 2008
BALANCE SHEET ITEMS
Notes Payable and Current Maturities of Long-Term Debt $ 952 $ 16,622
Long-Term Debt 398,613 398,479
Total Debt 399,565 415,101
Less: Cash and Cash Equivalents (304,888 ) (231,840 )
Net Debt 94,677 183,261
Equity 859,054 745,821
Net Capitalization $ 953,731 $ 929,082
Percentage of Net Debt to Net Capitalization 9.9 % 19.7 %
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
CASH FLOW ITEMS
Cash Provided from Operating Activities before Asbestos - Related Payments $ 102,239 $ 59,268 $ 160,513 $ 165,379
Asbestos Related Payments, Net of Insurance Recoveries (22,253 ) (18,301 ) (34,788 ) * (34,915 )
Cash Provided from Operating Activities 79,986 40,967 125,725 130,464
Less: Capital Expenditures (3,827 ) (13,257 ) (21,259 ) (33,658 )
Free Cash Flow $ 76,159 $ 27,710 $ 104,466 $ 96,806
* Includes a $14.5 million insurance settlement receipt from the Highlands Insurance Company.
Certain non-GAAP measures have been provided to facilitate comparison with the prior year.
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that non-GAAP financial measures which exclude certain non-recurring items present additional useful comparisons between current results and results in prior operating periods, providing investors with a clearer view of the underlying trends of the business. Management also uses these non-GAAP financial measures in making financial, operating, planning and
compensation decisions and in evaluating the Company's performance. In addition, Free Cash Flow provides supplemental information to assist management and investors in analyzing the Company`s ability to generate positive cash flow. Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in addition to, and not as a substitute for, the Company`s reported results prepared in accordance with GAAP.
Crane Co.
Richard E. Koch, 203-363-7352
Director, Investor Relations and Corporate Communications
www.craneco.com
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